Heady brew fails to calm the jitters

Jitters returned to the markets and the FTSE 100 resumed its downward path yesterday as a surprise fall in inflation and brewery bid talk failed to offset pressures from a sharp sell-off on Wall Street.

There were only nine risers, including beer group Scottish & Newcastle which shot up in late trading as talk swirled of an imminent bid from Danish rival Carlsberg. While neither company commented on the rumours, S&N added 7.5p, or 1.3%, to 580p, having pushed through 600p at one point.

The rest of the market was on the backfoot and hefty losses were broadly spread across the sectors, with miners, banks, food and media stocks all featuring among the biggest fallers.

With fears over a rapidly spreading credit crunch refusing to die away, the FTSE 100 ended the day 75.5 points lower at 6143.5, a loss of 1.2%. The FTSE 250 closed down 169.3 points, or 1.5%, at 10,998.6.

Much of the selling was prompted by early losses for the Dow following worrying signals from US retailers. Further fretting over the world's largest economy undid much of Monday's gains for London markets and reinforced a sense that the turmoil which battered equities last week was far from over.

Ahead of a tumultuous start to Wall Street's trading day, the London market had managed a few hours in positive territory as a surprise drop in inflation more than outweighed a downbeat outlook from Swiss banking group UBS. Traders were forced to scale back bets of a near-term interest rate rise after the prices data hugely undershot expectations.

That helped the miners turn around and until shortly before the close it looked as if they would be bolstering the FTSE 100 for a second day running. But as the session ended, only platinum specialist Lonmin was up. It added 52p, or 1.7%, to £31.14 and was the FTSE 100's biggest riser after news that the International Finance Corporation had exercised an option to buy shares.

Financial sector stocks suffered again as investors awaited the next news on who had been hit by sub-prime problems. Barclays lost 21.5p, or 3.3%, to 637p and hedge fund group Man was down 17.5p, or 3.4%, at 494.5p.

Shares in InterContinental Hotels Group were little moved by a positive outlook and eventually succumbed to the wider sell-off. Its shares closed down 12p at £10.89. Keith Bowman, analyst at Hargreaves Lansdown stockbrokers, noted the impact of a weak dollar and the fading prospects of a buyout given the current turmoil in markets.

"Investor concerns focus on the group's still significant exposure to the US economy - given its uncertain outlook - and the perceived fading odds on a takeover of the group - allowing for heightened private equity financing, thanks to the current credit crisis and rising interest rates."

In the retail sector there was a blow to Morrisons Supermarket after it withdrew sliced cold meats from delicatessen counters at two stores in Paisley, Scotland, where public health officers have been investigating an E coli outbreak which has killed an elderly person. Morrisons said the "full facts are not yet known," but it was working closely with authorities and had withdrawn the cold meats as a precaution. Its shares fell 7.5p, or 2.8%, to 258.5p.

J Sainsbury remained under pressure - down 2p at 545p - on worries the credit market crisis would hamper the chances of Qatari fund Delta Two being able to finance a bid.

There was more positive news from WH Smith after an upbeat trading update. The chain said it expected annual results to come in towards the top end of analysts' forecasts. Seymour Pierce upgraded their recommendation on the stock to outperform from hold.

"Of course, the lack of top line growth in the high street operation remains an issue for the longer term. Moreover, some commentators fear an acquisition of Borders. However, we believe that if bought cheaply enough, after elimination of central costs, WH Smith could do rather well out of it," they said in a note.

After scaling up to the top of the FTSE midcap's gainers board and coming within a whisker of 400p, the shares slipped back with the rest of the market and ended down 1p at 396.5p.

Smallcap photo booth maker Photo-Me International climbed 0.25p to 63.25p after it said there was enough interest in its vending arm to move to the next phase of a possible disposal. The board stressed there "can be no guarantee that a sale at an acceptable level will be achieved".

One stock that seemed immune to the broad sell-off was builder Rok. It jumped 20p, or 10.3%, to 215p after solid first-half results and an upbeat outlook. Analysts at Altium Securities said they "confidently" retained a buy recommendation on Rok, adding it represents "excellent value".

Sound business

Flat-panel loudspeaker business NXT told the market last month that two big US companies were poised for product launches utilising its sound technologies. One was unveiled to the market yesterday and provided a welcome boost to NXT's share price, up 0.75p, or 5.4%, at 14.75p. NXT said it was joining Hallmark to sell a range of greetings cards with sounds. NXT's technology will allow Hallmark cards to include music or dialogue from films and to tap into what the sound specialist calls "one of the strongest growth sectors within the greetings card market". NXT has disappointed recently and been forced to push through cost cutting measures. The greetings card deal, another US partnership and a number of contracts with car manufacturers point to stronger trading.